Papa John's CEO tells USF group how he mixes pizza and sports

John Schnatter, founder of Papa John's, stands with University of South Florida President Judy Genshaft on Wednesday. Schnatter told an audience at how he decides which athletes will serve as spokespeople for his pizza. One thing he does: meets their parents. THAD MOORE | Times

Papa John's is one of the NFL's most-recognized sponsors. It has inked deals with more than two-thirds of the league's teams. And it has secured endorsements from two of the sport's biggest names — Denver Broncos quarterback Peyton Manning and Houston Texans defensive end J.J. Watt.

Schnatter, 54, the company's founder and chief executive, says its close ties to the sport have given the chain a leg up in the ultracompetitive pizza business.

As Schnatter tells it, Papa John's got its start out of a broom closet in the back of a bar his family owned in Indiana. Now, the Louisville, Ky., company is the nation's fourth-largest pizza chain, behind Pizza Hut, Domino's and Little Caesar's, snagging 6 percent of the market and selling $2.6 billion in pizza last year, according to market research firm IBISWorld.

But then, endorsement deals have their downside, a risk Schnatter acknowledged Wednesday at the University of South Florida Sport and Entertainment Lecture Series. Just as a big-name endorsement can build up a brand, an athlete's bad behavior can sully it — even if it has nothing to do with pizza.

Schnatter, whom the USF Sport and Entertainment Management program named "sport marketer of the year," spoke on campus with Abraham Madkour, executive editor of the SportsBusiness Journal. Their conversation has been condensed.

Madkour: You so frequently use sports to market your product. When did you realize sports would be a good platform?

Schnatter: (Washington-area franchisee Bill Freitas) tried to get me 20 years ago to do the Redskins for like $200,000. I don't want to do the Redskins for $200,000. Well, he did it behind my back, and sales blew up. Then, we did a couple of other teams, and then we finally signed up for the NFL. To give you an example, Peyton (Manning) and I are partners in Denver, right? When we bought that market five years ago, we were losing a million bucks a year. This year, we're making $3 million.

Madkour: I've got pages and pages of team and college deals that you guys are partners with, so talk a little about how you choose some of the athletes that you feature.

Schnatter: The first thing we look for is reputation. Do they have a good reputation? Do they work hard? Are they dedicated? The second thing I do is I meet the parents.

Madkour: You meet the parents?

Schnatter: I meet the parents. It's just real important that they come from a good family. … J.J. Watt's parents — we flew up to a game with them a few weeks ago and got to know them a little bit. I'm flying out this weekend to Denver with Archie Manning and Olivia, his wife. So we get involved with the family.

Now, moving forward, this upsets my marketing guys: They want to jump to the next guy, but I don't like to jump around. Peyton Manning will always be the Michael Jordan of football and he's a partner of mine, so he and I will be involved more in the family in the future, not less.

Schnatter: If I was Pizza Hut, I'd have been on that four years ago, before he was really a superstar. But I mean, J.J. Watt's a delivery driver for Pizza Hut and you don't get the guy to endorse you? So I flew down to meet J.J., and I said, "By the way, you do what's best for you. If you want to go to Pizza Hut, I have no problem with that. Just do what's best for you." And he liked that and he liked our ingredients story, so we signed him, like, the next week, and he's one of the best players in the NFL.

Madkour: We talked about athletes as endorsers and spokespersons, but it does have a double-edged sword. And you put a lot of your brand equity into the equity of that athlete. You've come out publicly — one of the only brands that's come out publicly — supporting Peyton Manning during this time where he's been in the news with the Al Jazeera report (that he used human growth hormone). … What was the thought process there?

Schnatter: Well, he's a trusted friend. He said he didn't do it. I mean, some of the other sponsors are saying, "We're going to monitor the situation." … If you feel that way about him, if you think he would lie, why would you want him as an endorser? He said he didn't do it; that's good enough for me.

Madkour: In the sports business, it was a statement that really resonated, because like you said, you came out firmly where others don't necessarily do that.

Schnatter: But I also own the company, and if I was wrong, I would take the hit with the consumer, the public. … I think when things are down, that's when you've got to get behind people.

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